A question mark hangs over Israel’s $35 billion gas export deal to Egypt because the Ministry of Energy and Infrastructure is delaying approval of the Nitzana pipeline construction project. Due to the delay, US Secretary of Energy Chris Wright has canceled a planned visit to Israel. According to Israel’s Minister of Energy and Infrastructure Eli Cohen, the curb on exports will continue, “until a fair price for the Israeli market is agreed on.”
This dispute stems, among other things, from the collapse of the giant deal between the Tamar partners and the Israel Electric Corp. (IEC). The dispute could also affect expansion of production from the Leviathan reservoir. Who will benefit if the deal with Egypt collapses, and what are the solutions? “Globes” explains.
What is the giant deal with Egypt?
The deal, signed in August, includes exports of 22% of production from the Leviathan reservoir and almost 13% of Israel’s total gas capacity. In fact, it triples total exports to Egypt compared with the current situation and will include an expansion of production from Leviathan. The deal is structured so that the guaranteed quantity is annual, not daily. In other words, the Egyptians will receive less gas during peak consumption times in Israel (winter and summer), and the annual quantity will be completed in the other seasons, when consumption in Israel is more moderate.
According to several sources in the economy, the final export permit that would approve the deal was supposed to be given at a ceremony attended by the US Secretary of Energy, who canceled his visit. The delay in the deal is aimed at ensuring a low gas price for the Israeli economy, due to the collapse of the IEC’s giant deal to buy gas from the Tamar reservoir.
What is the deal between the IEC and the Tamar Partners?
State-owned IEC is the largest electricity producer in Israel, and the sole gas supplier to its power stations is the Tamar reservoir, which is owned by Chevron, which operates the field, Isramco, Alon, businessman Aaron Frenkel, and other investors (including the governments of the UAE and Azerbaijan).
The IEC and Tamar signed a contract valid until 2030, with several dates during which the price could change by up to 10% in either direction. The average gas price for the IEC as of 2024 was $4.7 per thermal unit. According to estimates, the average sale price to Egypt will be $7.4, about 57% higher.
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A few months ago, a memorandum of understanding (MoU) was signed between the IEC and Tamar Partners, which includes a price reduction of about NIS 1 billion over the years, and an extension of the contract until 2035. However, Isramco, the largest partner in Tamar, decided in September not to extend the agreement, and together with the other partners, it was decided to go to arbitration in a court in London, to set a better price.
The Tamar reservoir is currently almost the only player with free gas for the Israeli market, giving it bargaining power with the IEC. However, not everyone agrees with the decision to go to arbitration: Chevron, the operator of the field, and the smaller partner Alon, prefer to adhere to the (MoU).
What is the Ministry of Energy and infrastructure demanding?
Following the collapse of talks with the Tamar Partners, the Ministry of Energy and Infrastructure is making new demands. In order to export to Egypt, the Leviathan reservoir will spread its exports beyond 2040, the date originally planned, in order to sell at an especially cheap price to the Israeli economy, even less than that set In the gas outline plan, which expired in 2021. Until then, a price was set, based on various linkages, but since then is supposed to be set through free negotiations.
Who will lose from the collapse of the deal?
If the deal does not go through, the big losers will be Leviathan’s partners, led by NewMed Energy (TASE: NWMD), owned by Delek Group (TASE: DLEKG), controlled by Yitzhak Tshuva. NewMed initiated talks for the export deal to Egypt in the first place, and holds 45% of the Leviathan field.
US company Chevron, which operates the field and holds a 40% stake will also suffer. Chevron is also the operator of the competing Tamar field, so has a dual interest in the Israeli gas market. The state coffers will also be greatly affected. The total tax on gas companies is 62%, so that many billions in profits for the state, and perhaps even tens of billions, are at stake.
How serious is the threat to the Egyptian agreement?
The gas market is divided on the matter. The sentiment in the market is not negative at the moment, as is evident from the rise in NewMed’s stock in trading on the TASE at the start of the week. Behind the rise is an assumption that the agreement will ultimately be approved, because the state, and the Ministry of Energy in particular, has an interest in it. A gas market expert complains about the micromanagement of specific contracts and tells “Globes,” “The minister is right to leverage the export permit for tough talks with producers, but the focus should not be on a specific contract (22% of energy consumption in 2030), but rather on a broader economic perspective.”
Who will benefit from a change in the agreement?
Given an agreement on a price, for example, similar to that of the expired gas outline plan, the Leviathan partnership would be able to “stretch” the sale of gas to Egypt over a longer period of time, thus selling gas reserves to the local economy. This gas could either reach the IEC (which would require a tender process), or be used by new power plants being built today, such as OPC Hadera and Reindeer.
It remains to be seen what terms Chevron and NewMed will agree to secure the deal. If there is a major change, the last-minute demand could be a success. If the deal falls through, or if only cosmetic changes are made, it is not clear whether the undermining of regulatory stability would be worth it.
Chevron said, “We look forward to continuing to support Israel’s strategy to develop its energy resources for the benefit of the State of Israel and the region. We are proud of what we have done and continue to do to support the energy security of Israel and the region.”
No response was forthcoming from NewMed, the Ministry of Energy and Infrastructure, Tamar Petroleum, and the IEC.
Published by Globes, Israel business news – en.globes.co.il – on November 4, 2025.
© Copyright of Globes Publisher Itonut (1983) Ltd., 2025.
